US interest rates have changed for the first time since mid-2006, reduced from 5.25% to 4.75%, an unforeseen 0.5% cut which shot shares to four year highs.Analysts had expected the Federal Reserve to cut rates 0.25% to prevent a housing market downturn and the"credit crunch" from denting the economy.
By making money cheaper to borrow, people can spend and invest more, revitalising the economy, they say.
Some wanted the Fed to leave rates on hold to focus on controlling inflation.
A reduction in rates by 50 basis points would fuel inflation and lead to the "cheap money" conditions that have brought boom-and-bust to the property sector, they had argued.
However immediately after the decision was announced US stocks rallied, with all three major indexes up more than 1%.
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